1-1     By:  Hunter, et al. (Senate Sponsor - Armbrister)     H.B. No. 1687
 1-2           (In the Senate - Received from the House April 30, 1999;
 1-3     May 3, 1999, read first time and referred to Committee on Economic
 1-4     Development; May 13, 1999, reported favorably by the following
 1-5     vote:  Yeas 6, Nays 0; May 13, 1999, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to a state program of loan guarantees to promote the film
 1-9     industry in this state; providing a penalty.
1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11           SECTION 1.  Chapter 403, Government Code, is amended by
1-12     adding Subchapter N to read as follows:
1-13        SUBCHAPTER N.  TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE
1-14                                   PROGRAM
1-15           Sec. 403.321.  DEFINITIONS.  In this subchapter:
1-16                 (1)  "Eligible Texas film" means a Texas film in which:
1-17                       (A)  the budget for the production costs of the
1-18     film is at least 70 percent of the budget for the total cost to
1-19     produce the film; and
1-20                       (B)  the budget for the total cost to produce the
1-21     film is at least $1 million but not more than $5 million.
1-22                 (2)  "Filmed entertainment" means a visual and sound
1-23     production that may be displayed in any media, including a theater
1-24     or television broadcast, or through technology by means of a
1-25     consumer owned or operated device.
1-26                 (3)  "Production costs" means the total cost of
1-27     producing filmed entertainment minus the sum of:
1-28                       (A)  the total costs incurred for the producer,
1-29     director, writer, and screenplay of the production;
1-30                       (B)  the total amount paid to the actors
1-31     appearing in the production, not to exceed the total amount paid to
1-32     the five highest-paid actors appearing in the production; and
1-33                       (C)  the ordinary and necessary interstate and
1-34     foreign travel expenses involved in the production.
1-35                 (4)  "Program" means the loan guarantee indemnity
1-36     program administered by the comptroller under this subchapter.
1-37                 (5)  "Texas derivation" means goods purchased or leased
1-38     or services purchased, leased, or employed from a:
1-39                       (A)  resident of this state; or
1-40                       (B)  vendor or supplier who is located and doing
1-41     business in this state.
1-42                 (6)  "Texas film" means filmed entertainment in which
1-43     at least 80 percent of the budget for the production costs of the
1-44     filmed entertainment is dedicated for goods and services of Texas
1-45     derivation.
1-46                 (7)  "Texas film producer" means:
1-47                       (A)  an individual resident of this state who
1-48     produces Texas films; or
1-49                       (B)  a corporation, limited liability company,
1-50     partnership, or other private entity that:
1-51                             (i)  is organized under the laws of this
1-52     state; and
1-53                             (ii)  includes as one of its purposes the
1-54     production of one or more Texas films.
1-55                 (8)  "Texas lender" means a state or national bank that
1-56     is domiciled in or has a branch office in this state.
1-57           Sec. 403.322.  LIBERAL CONSTRUCTION.  This subchapter shall
1-58     be liberally construed to accomplish the purposes stated in this
1-59     subchapter.
1-60           Sec. 403.323.  TEXAS FILM INDUSTRY ADMINISTRATIVE FUND.  (a)
1-61     The Texas film industry administrative fund is an account in the
1-62     general revenue fund.
1-63           (b)  The following amounts shall be deposited in the fund:
1-64                 (1)  appropriations for the implementation and
 2-1     administration of this subchapter;
 2-2                 (2)  interest paid on money in the fund;
 2-3                 (3)  fees charged under this subchapter;
 2-4                 (4)  any proceeds from the realization of collateral
 2-5     provided to this state under the program; and
 2-6                 (5)  any other amounts received by this state for loan
 2-7     guarantees approved for issuance under this subchapter.
 2-8           (c)  Money in the fund may be used only for the
 2-9     administration of this subchapter.
2-10           (d)  Section 403.095 does not apply to the fund.
2-11           Sec. 403.324.  TEXAS FILM INDUSTRY  LOAN GUARANTEE INDEMNITY
2-12     PROGRAM.  (a)  The comptroller shall administer a program to
2-13     guarantee a certain amount of one or more qualified Texas film
2-14     production loans as a means to facilitate access to capital for the
2-15     production of filmed entertainment in this state.  The comptroller
2-16     may approve the issuance of a guarantee of a qualified Texas film
2-17     production loan or loans for the production of more than one Texas
2-18     film by a single Texas film producer.
2-19           (b)  The comptroller may not approve the issuance of a loan
2-20     guarantee except on approval of a qualified application submitted
2-21     by a Texas film producer with the approval of a Texas lender who
2-22     has agreed to make a qualified Texas film production loan to the
2-23     producer.
2-24           (c)  For each guarantee, the comptroller shall:
2-25                 (1)  determine the maximum guarantee amounts; and
2-26                 (2)  determine the terms and conditions relating to a
2-27     guarantee.
2-28           (d)  An action or claim under a loan guarantee must be
2-29     brought not later than the third anniversary of the date on which
2-30     the comptroller approves the issuance of the guarantee.
2-31           (e)  The guarantee amount approved for issuance by the
2-32     comptroller under this subchapter may not exceed the lesser of:
2-33                 (1)  80 percent of the total amount of the Texas film
2-34     production loan; or
2-35                 (2)  $2.4 million.
2-36           Sec. 403.325.  QUALIFIED TEXAS FILM PRODUCTION LOAN.  To
2-37     qualify as a Texas film production loan, a loan must:
2-38                 (1)  be in an amount not to exceed the lesser of:
2-39                       (A)  60 percent of the total cost to produce the
2-40     film; or
2-41                       (B)  $3 million; and
2-42                 (2)  be made by a Texas lender under a written loan
2-43     agreement that:
2-44                       (A)  is entered into with a Texas film producer
2-45     to finance the production of an eligible Texas film;
2-46                       (B)  may be conditioned on the approval for the
2-47     issuance of a loan guarantee under this subchapter;
2-48                       (C)  provides that the loan must be secured by:
2-49                             (i)  a security interest on the eligible
2-50     Texas film to be financed by the loan and proceeds and receivables
2-51     due from the film; and
2-52                             (ii)  a security or other interest in a
2-53     distribution agreement covering the film, an irrevocable letter of
2-54     credit, a presale agreement covering the film, a certificate of
2-55     deposit, a marketable security, or another instrument that meets
2-56     all requirements and is secured in the manner and to the extent
2-57     provided by rules adopted by the comptroller; and
2-58                       (D)  meets any other requirement prescribed by
2-59     the comptroller.
2-60           Sec. 403.326.  APPLICATION FOR LOAN GUARANTEE.  (a)  An
2-61     application for a loan guarantee under the program must:
2-62                 (1)  contain the names and addresses of the Texas
2-63     lender and the Texas film producer of the film that is the subject
2-64     of the loan;
2-65                 (2)  contain a certification by the Texas film producer
2-66     that the film is an eligible Texas film;
2-67                 (3)  be accompanied by:
2-68                       (A)  a certification by the Texas lender that:
2-69                             (i)  the Texas lender has reviewed the
 3-1     application;
 3-2                             (ii)  the budget for the total cost to
 3-3     produce the Texas film as disclosed in the application is the same
 3-4     as the budget for the total cost to produce the film that was
 3-5     disclosed to the Texas lender for purposes of determining whether
 3-6     to make the loan; and
 3-7                             (iii)  the information contained in the
 3-8     application is not contrary to the information submitted to the
 3-9     Texas lender in connection with the loan;
3-10                       (B)  a copy of the loan agreement described by
3-11     Section 403.325; and
3-12                       (C)  a copy of a distribution agreement or other
3-13     instrument described by Section 403.325(2)(C)(ii), as appropriate;
3-14     and
3-15                 (4)  contain any other information required by the
3-16     comptroller.
3-17           (b)  The comptroller shall charge an application fee in a
3-18     reasonable amount not to exceed $100 to cover the cost of
3-19     processing the application.
3-20           (c)  On receipt of an application, the comptroller shall
3-21     verify the information contained in the application.  The
3-22     comptroller may conduct investigations as necessary to make a
3-23     determination regarding information provided in the application.
3-24           (d)  The comptroller may contract with a private company to
3-25     perform any of the comptroller's duties under Subsection (c) and to
3-26     submit a written report of the company's findings to the
3-27     comptroller.
3-28           (e)  The comptroller may not approve an application submitted
3-29     under this section unless it is complete and meets the requirements
3-30     of this section.
3-31           Sec. 403.327.  INDEMNITY REQUIREMENT.  For each film to be
3-32     produced with the proceeds from a loan approved to be guaranteed
3-33     under the program, the producer of the film shall provide an
3-34     indemnity against loss in an amount equal to the full amount of the
3-35     loan guarantee.  The indemnity must be issued to the comptroller as
3-36     the beneficiary of the indemnity by an insurance company, surety
3-37     company, or financial institution that is:
3-38                 (1)  licensed and authorized to do business in this
3-39     state; and
3-40                 (2)  approved by the comptroller.
3-41           Sec. 403.328.  SURETY BOND FOR COMPLETION OF FILM.  An
3-42     applicant shall file with the comptroller a surety bond
3-43     indemnifying this state, the lender, and the entity providing
3-44     indemnity under Section 403.327 against loss that results from the
3-45     film not being completed by the date and for the budget certified
3-46     to the state in the application required by Section 403.326.
3-47           Sec. 403.329.  ISSUANCE OF LOAN GUARANTEE.  The comptroller
3-48     may not approve the issuance of a loan guarantee under the program
3-49     unless:
3-50                 (1)  the loan for which the guarantee is sought meets
3-51     the qualifications of a Texas film production loan under Section
3-52     403.325;
3-53                 (2)  the comptroller approves the application for the
3-54     loan guarantee;
3-55                 (3)  the comptroller has received the application fee
3-56     required by Section 403.326(b); and
3-57                 (4)  the indemnity requirements of Section 403.327, the
3-58     surety bond requirements of Section 403.328, and any other bond or
3-59     insurance requirements prescribed under this subchapter or by
3-60     comptroller rule have been satisfied.
3-61           Sec. 403.330.  RULEMAKING AUTHORITY.  The comptroller shall
3-62     adopt rules relating to the implementation of the program and any
3-63     other rules necessary to accomplish the purposes of this
3-64     subchapter.  The rules must include:
3-65                 (1)  terms and conditions for a security interest or
3-66     other pledge of collateral to be provided to a lender or this state
3-67     as security for any default of a loan guaranteed under the program;
3-68     and
3-69                 (2)  procedures for the enforcement of obligations owed
 4-1     and pledges of collateral provided to the comptroller under the
 4-2     program.
 4-3           Sec. 403.331.  OFFENSE.  (a)  A person commits an offense if
 4-4     the person signs an application or submits to the comptroller a
 4-5     document the person knows is false in any material respect with the
 4-6     intent of causing the comptroller to issue a loan guarantee under
 4-7     the program.
 4-8           (b)  An offense under this section is a felony of the third
 4-9     degree.
4-10           Sec. 403.332.  LIMITATIONS IN PROGRAM.  (a) Not more than $50
4-11     million of guarantees issued under this program may be outstanding
4-12     at any one time.
4-13           (b)  The liability of the state for a loan guarantee for a
4-14     film is limited to the amount of the indemnity provided for the
4-15     film under Section 403.327.
4-16           Sec. 403.333.  QUARTERLY REPORT.  At least quarterly, the
4-17     comptroller shall provide to the director of the Legislative Budget
4-18     Board, the presiding officer of the Senate Finance Committee, and
4-19     the presiding officer of the House Appropriations Committee a
4-20     report that contains:
4-21                 (1)  the names and addresses of the Texas film
4-22     producers that have applied to the comptroller for a loan guarantee
4-23     under the program and their respective Texas lenders;
4-24                 (2)  the names and addresses of the Texas film
4-25     producers and their respective Texas lenders that have been
4-26     approved to receive a loan guarantee under the program;
4-27                 (3)  the amount of the loan guarantee approved by the
4-28     comptroller to each applicant described by Subdivision (2); and
4-29                 (4)  any other information relating to the program that
4-30     may be requested to be included in the report.
4-31           Sec. 403.334.  GIFTS AND GRANTS.  The comptroller may solicit
4-32     and accept gifts, grants, and donations from any source for the
4-33     purposes of this subchapter.
4-34           Sec. 403.335.  APPLICATION OF SUNSET ACT TO PROGRAM.  (a)
4-35     The program is subject to review under Chapter 325 (Texas Sunset
4-36     Act) as if it were a state agency subject to review under that
4-37     chapter.  If the program is not continued in existence in
4-38     accordance with that chapter, the program is abolished and this
4-39     subchapter expires September 1, 2005.
4-40           (b)  To the extent that Chapter 325 (Texas Sunset Act) places
4-41     a duty on a state agency subject to review under that chapter, the
4-42     comptroller shall perform the duty as it relates to the program.
4-43           SECTION 2.  Subchapter B, Chapter 403, Government Code, is
4-44     amended by adding Section 403.029 to read as follows:
4-45           Sec. 403.029.  TRANSFER OF CERTAIN MONEY TO GENERAL REVENUE
4-46     FUND.  On the expiration of Subchapter N:
4-47                 (1)  the comptroller shall determine the amount
4-48     sufficient to administer loan guarantees or obligations of the
4-49     comptroller that remain outstanding under the Texas film industry
4-50     loan guarantee indemnity program administered by the comptroller
4-51     under Subchapter N; and
4-52                 (2)  any amount in the Texas film industry
4-53     administrative fund that exceeds the amount determined under
4-54     Subdivision (1) may be used only by the Music, Film, Television,
4-55     and Multimedia Office in the governor's office for the purpose of
4-56     promoting the film industry in this state.
4-57           SECTION 3.  The comptroller shall adopt rules required by
4-58     Section 403.330, Government Code, as added by this Act, not later
4-59     than December 1, 1999.
4-60           SECTION 4.  This Act takes effect September 1, 1999.
4-61           SECTION 5.  The importance of this legislation and the
4-62     crowded condition of the calendars in both houses create an
4-63     emergency and an imperative public necessity that the
4-64     constitutional rule requiring bills to be read on three several
4-65     days in each house be suspended, and this rule is hereby suspended.
4-66                                  * * * * *